>Am I correct to assume that I2O has immediately became an de facto standard?
The proof is in the eating, but it sure looks like from now on servers must implement I2O to be competitive. I2O may well be on its way of being a de facto requirement, not just a standard.
>Is this [the breath of the launch] a surprise to you?
I sensed that Intel was serious about getting I2O off the ground, and that lot's of companies were working on I2O designs. (After all WIND had 50 I2O design wins in their last reported quarter alone.) But I had no idea that the coming-out party in Atlanta would be orchestrated to the extent that is was. Intel obviously intended to end any doubt about the coming importance and prevalence of I2O.
>Do you think that analysts would now accelerate I2O earnings, regardless of what the company requests?
They probably will continue to follow company guidance and NOT include I2O estimates until the company has experienced significant royalties from Intel. For example, the earnings this quarter will be 18 cents versus an estimated 16 cents. Analysts have no reason to up this quarter's estimate. The fourth quarter's estimate will be nudged up by the end of November, resulting in a 64 to 66 cent year. Again, no reason to change course yet.
Estimates for next year, however, get interesting. Every quarter will benefit from I2O production-level royalties. Beginning royalites will be substantial as Intel fills the channel; ending-quarter royalites will grow even larger as I2O volume accelerates. Analysts of course expect this, and after Atlanta they must be convinced and willing to include I2O in their estimates. I believe they will resolve this conundrum by leaving official estimates as they are, but replacing discussion about I2O with numbers. Seasoned investors will augment official estimates with the analysts I2O royalty estimates, like we have been doing on this thread for a year and a half.
You are correct in believing the stock price would react favorably to significantly increased estimates and earnings growth rates. But advancing earnings estimates prematurely would also increase volatility and put a gun to management's head to produce I2O royalties in a timely manner, as defined by analysts. We know management feels this could run contrary to the proper pace at which I2O should develop, and, further, management knows the pace is up to Intel and associated companies, not WIND. And I feel the same way. I would rather not see a feeding frenzy develop around I2O, propelling WIND stock to high prices that, while still justified economically, cannot be sustained in the short term.
If I ever get around to describing how the long-term investor might look at selling companies, a by-product would be the single, most important principle of excellent management:
Excellent managers NEVER compel the long-term investor to sell stock.
If a mania developed around I2O, and the stock responded to the hype, true or not, then the long-term investor would know that any disappointment, however slight, about the timing or spread of I2O, would lead to a significant sell-off in the price of the stock. Thus, even if the long-term investor remains bullish about long-term potential, he/she may be compelled to take profits at the first sign of disappointment.
Just so there aren't any misperceptions, stock prices of companies run by excellent managers may be highly volatile, and not every quarter will the execution be perfect, with perfect earnings. You might recall that even when WIND sold off 50% last spring, there was never a reason for the long-term investor to sell the stock. In fact, there has never been a reason for the long-term investor to sell WIND since the day Ron Abelmann became the CEO, and I doubt there ever will be. The way he is containing the I2O story is a case study of this principle.
Traders obviously feel differently, and would like nothing more than to see WIND, or any stock, explode in price, up or down. Too bad for them that the company isn't managed to benefit traders, but they still manage to have lot's of fun with WIND.
Allen |
